Question

Selected hypothetical financial data of Target and Wal-Mart for 2022 are presented here (in millions). Please show how to do the equations. Thank you.

		Target Corporation				Wal-Mart Stores, Inc.
		Income Statement Data for Year
Net sales			$66,700			$409,000
Cost of goods sold			46,000			306,000
Selling and administrative expenses			14,700			76,000
Interest expense			650			1,800
Other income (expense)			(95	)		(420	)
Income tax expense			1,400			7,200
Net income			$ 3,855			$ 17,580
		Balance Sheet Data (End of Year)
Current assets			$19,000			$48,000
Noncurrent assets			25,600			120,000
Total assets			$44,600			$168,000
Current liabilities			$10,000			$55,000
Long-term debt			18,200			44,000
Total stockholders’ equity			16,400			69,000
Total liabilities and stockholders’ equity			$44,600			$168,000
		Beginning-of-Year Balances
Total assets			$43,000			$162,000
Total stockholders’ equity			13,500			66,000
Current liabilities			10,500			55,000
Total liabilities			29,500			96,000
		Other Data
Average net accounts receivable			$7,800			$3,900
Average inventory			7,000			33,700
Net cash provided by operating activities			5,600			26,800
Capital expenditures			1,800			12,400
Dividends			460			4,500

For each company, compute the following ratios. (Round current ratio answers to 2 decimal places, e.g. 15.50, debt to assets ratio and free cash flow answers to 0 decimal places, e.g. 5,275 and all answers to 1 decimal place, e.g. 1.8 or 1.83%.)

		Ratio		Target			Wal-Mart
(1)		Current ratio		enter the current ratio	:1		enter the current ratio	:1
(2)		Accounts receivable turnover		enter accounts receivable turnover in times	times		enter accounts receivable turnover in times	times
(3)		Average collection period		enter average collection period in days	days		enter average collection period in days	days
(4)		Inventory turnover		enter inventory turnover in times	times		enter inventory turnover in times	times
(5)		Days in inventory		enter days in inventory ratio	days		enter days in inventory ratio	days
(6)		Profit margin		enter percentages	%		enter percentages	%
(7)		Asset turnover		enter asset turnover in times	times		enter asset turnover in times	times
(8)		Return on assets		enter percentages	%		enter percentages	%
(9)		Return on common stockholders’ equity		enter percentages	%		enter percentages	%
(10)		Debt to assets ratio		enter percentages	%		enter percentages	%
(11)		Times interest earned		enter times interest earned	times		enter times interest earned	times
(12)		Free cash flow		$enter a dollar amount			$enter a dollar amount

Answer 1

Ans. 1	Current ratio   =   Total current assets / Total current liabilities
	Target	$19,000 / $10,000	1.90 : 1
	Wal - mart	$48,000 / $55,000	0.87 : 1
Ans. 2	Accounts receivable turnover ratio   = Net sales / Average accounts receivable
	Target	$66,700 / $7,800	8.55	times
	Wal - mart	$409,000 / $3,900	104.87	times
Ans. 3	Average collection period   =   No. of days in year / Net credit sales * Average accounts receivables
	Target	365 / $66,700 * $7,800	42.68	days
	Wal - mart	365 / $409,000 * $3,900	3.48	days
Ans. 4	Inventory turnover = Cost of goods sold / Average inventory
	Target	$46,000 / $7,000	6.57	times
	Wal - mart	$306,000 / $33,700	9.08	times
Ans. 5	Days in inventory   =   No. of days in year / Inventory turnover ratio
	Target	365 / 6.57	55.56	days
	Wal - mart	365 / 9.08	40.2	days
Ans. 6	Profit margin = Net income / Net sales * 100
	Target	$3,855 / $66,700 *100	5.78%
	Wal - mart	$17,580 / $409,000 * 100	4.30%
Ans. 7	Asset turnover = Net sales / Average assets
	Target	$66,700 / $43,800	1.52	times
	Wal - mart	$409,000 / $165,000	2.48	times
	*Average assets = (Beginning assets + Ending assets) / 2
	Target	($43,000 + $44,600) / 2	$43,800
	Wal - mart	($162,000 + $168,000) / 2	$165,000
Ans. 8	Return on assets =   Net income / Average assets * 100
	Target	$3,855 / $43,800 *100	8.80%
	Walmart	$17,580 / $165,000 * 100	10.65%
Ans. 9	Return on Common stockholder's equity =   Net income / Average Common stockholder's equity * 100
	Target	$3,855 / $14,950 *100	25.79%
	Walmart	$17,580 / $67,500 * 100	26.04%
	* Average Stockholder's equity =   (Beginning equity + Ending equity) / 2
	Target	($13,500 + $16,400) / 2	$14,950
	Walmart	($66,000 + $69,000) / 2	$67,500
Ans.10	Debt to assets ratio =   Total liabilities / Total assets * 100
	Target	$28,200 / $44,600 * 100	63.23%
	Walmart	$99,000 / $168,000 * 100	58.93%
	*Total liabilities = Current liabilities + Long term debt
		Target	Walmart
	Current liabilities	$10,000	$55,000
	Long term debt	$18,200	$44,000
	Total liabilities	$28,200	$99,000
Ans. 11	Time interest earned = Income before interest and taxes / Interest expenses
	Target	$6,000 / $650	9.23	times
	Walmart	$27,000 / $1,800	15	times
	*Calculation of income before interest and taxes:
		Target	Walmart
	Net sales	$66,700	$409,000
	Cost of goods sold	($46,000)	($306,000)
	Selling & administrative expenses	($14,700)	($76,000)
	Income before interest and taxes	$6,000	$27,000
Ans. 12	Free cash flow =   Net cash provided by operating activities - Capital expenditures - Dividends
	Target	$5,600 - $1,800 - $460	$3,340
	Walmart	$26,800 - $12,400 - $4,500	$9,900